No one likes to pay more taxes than they have to – so be sure to take advantage of all of the tax credits available. In this article, we’ll look at the new tax credits for 2022 in Canada and also discuss the key existing ones.
New tax credits for 2022 in Canada
With the prices of food, housing and other essentials soaring this year, the Canadian government has introduced three new benefits to help soften the blow of inflation:
- Doubling (for six months) the GST tax credit for people with low incomes. A single Canadian will receive an extra $234. A couple with two children will get $467 extra. Seniors will get $225 extra on average.
- There has been a lot of talk in Ottawa about creating a national dental care plan. The Canadian government is taking the first step by helping out families with children under 12 and who do not have dental insurance. Families with an adjusted income under $90,000 can get a tax credit of up to $650 per child. Eventually, the government plans to extend the plan to all children, adults with low incomes and seniors.
- There is no question that the cost of renting a house or apartment has soared in the last year. Canada is providing a one-time top-up of $500 for the Canada Housing Benefit for low-income earners.
If you live in Ontario, you can claim a staycation tax credit for spending in 2022 on Ontario hotels, motels, vacation properties and campgrounds. You get a 20 percent tax credit on $2,000 in spending for a family or $1,000 in expenses for an individual. In other words, the tax credit is $400 per couple or $200 for a single person. You can claim the staycation tax credit when you file your tax return next spring.
Those are the new tax credits for 2022 in Canada. Read on to learn about tax deductions and tax credits to help you minimize your taxes.
What’s the difference between a tax deduction and a tax credit?
It’s important to distinguish between the two because a tax deduction will reduce your income more than a tax credit.
A tax deduction allows you to subtract the amount from your total income. This will reduce the income that is subject to tax. For example, if you are self-employed, you can deduct any business expenses related to your earned income, such as your website, marketing costs and business travel.
On the other hand, tax credits reduce the amount you pay on taxable income. There are two types of tax credits:
- Non-refundable tax credits: If you have enough of these credits, you can reduce your income to zero. But the government won’t send you a refund on the remainder. That’s why they are called “non-refundable.”
- Refundable tax credits: The government will send you a cheque or make a direct deposit if your net income is negative.
What are the other key tax credits and deductions?
There are many different tax credits depending on where you live in Canada and your occupation. For complete information, visit the Canadian government website. We’ve already discussed the new 2022 tax credits in Canada – now let’s look at some of the popular existing credits:
- The RRSP deduction: When you contribute to your Registered Retirement Savings Plan, you reduce your net income. This tax credit is one of the most commonly claimed because anyone with an earned income (from employment or self-employment) can take advantage. It reduces your net income so that your tax owing is less. Of course, it also builds a nest egg for your retirement.
- Medical expenses: Many people purchase private insurance or receive coverage through their employer. In addition, you may be eligible for more deductions. If you pay the insurance premiums, you can claim these. If you cover part of the cost of drugs or dental treatments, these expenses are deductible. Home renovations are covered if you or a family member need improved accessibility. Make sure that you claim all of the eligible expenses!
- Canada Child Benefit: This is a tax-free monthly payment to help eligible families defray the cost of raising a child. It is paid to lower income earners, with the amount depending on your family income. The maximum is $583 per month for a child under six and $492 per month for kids 6-17.
- Childcare expenses: Anyone who has a child in daycare, knows that this service can be expensive. The government allows you to deduct part of these costs, but usually only the spouse with the lower net income can claim. Be sure to keep all of your daycare receipts. In addition to daycare, you can submit the cost of a nanny, day camps and overnight camps.
- Tuition deduction: If you or your spouse are taking post-secondary courses, you can claim the tuition deduction. In addition, if your child receives a tuition receipt but doesn’t need the deduction to reduce their taxable income to zero, they can transfer the remainder to you. Post-secondary education is expensive so be sure to claim this deduction.
- Moving expenses: If you moved at least 40 kilometres to take a new job, open a business or go to school, you can claim your moving expenses. This can be a valuable one for post-secondary students who are heading out of town to school.
With all of these tax credits and deductions, there are limits and eligibility rules. So be sure to check the details. And keep all of your receipts in case the CRA asks for them – they could disallow it if you can’t prove that you spent the money.
Additional tax deductions and credits
There are many more depending on your situation. If you are disabled, or have a child who is, there are credits to help you with the additional costs you may face. Specialized occupations like volunteer firefighters and members of the Canadian Forces may be eligible for deductions. Check to make sure that you are taking advantage of all the available tax breaks.